Exactly how do MNCs manage cultural risks in the GCC countries

Exactly how do MNCs manage cultural risks in the GCC countries

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Studies claim that the success of international businesses in the Middle East hinges not merely on monetary acumen, but additionally on understanding and integrating into regional cultures.

This cultural dimension of risk management requires a change in how MNCs operate. Adapting to regional traditions is not just about understanding company etiquette; it also requires much deeper cultural integration, such as for instance understanding regional values, decision-making styles, and the societal norms that influence company practices and worker conduct. In GCC countries, successful business relationships are built on trust and personal connections instead of just being transactional. Additionally, MNEs can benefit from adapting their human resource administration to mirror the social profiles of local employees, as factors influencing employee motivation and job satisfaction differ widely across countries. This calls for a shift in mindset and strategy from developing robust economic risk management tools to investing in social intelligence and regional expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Regardless of the political uncertainty and unfavourable economic climates in some parts of the Middle East, foreign direct investment (FDI) in the region and, especially, within the Arabian Gulf has been progressively increasing within the last 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk seems to be important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as experts and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a new focus has appeared in current research, shining a spotlight on an often-ignored aspect namely cultural factors. In these pioneering studies, the authors pointed out that companies and their management often seriously underestimate the impact of social facets due to a lack of knowledge regarding cultural variables. In fact, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.

A lot of the present literature on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, plenty of research within the international management field has focused on the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a company's danger visibility. Nevertheless, recent studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management methods on the firm level in the Middle East. In one research after collecting and analysing data from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously far more multifaceted than the usually analyzed factors of political risk and exchange rate visibility. Cultural danger is perceived as more important than political risk, monetary risk, and economic danger. Secondly, despite the fact that aspects of Arab culture are reported to really have a strong impact on the business environment, most firms struggle to adapt to regional routines and traditions.